Archive - Jun 9, 2013 - Story

With JPY back around 98 and the Nikkei 225 indicating further advances, perhaps the fears in the market are mis-represented - at least that's what the other Goldman desk would have you believe. But, as The Japan Times reports, even glorious leader Abe's own LDP party are beginning to voice concerns that all this fluff is - well - just that. As we outlined here the market is already concerned, and additionally as Goldman notes, the fact that the JGBi expected inflation level - a now symbolic indicator of policy success since Kuroda quoted it -  is now suddenly moving counter to its previous extended trend could possibly indicate the markets’ early signal questioning the credibility of the BOJ policy. The recent stock price collapse, Lower House LDP lawmakers noted "shows the market expects little (of Abenomics)." The sky-high approval ratings (and business confidence) for the Abe Cabinet have been bolstered by the resurgence of the benchmark Nikkei since 'Abe(g)nomics began. The stock market’s downturn, therefore, has created a sense of crisis among some members of the ruling LDP, because "Abenomics could fail."

Whenever Juncker is lying, or Goldman openly commands the muppets to buy, you know the situation is serious, and Goldman has a lot of unwinding to do. Which is precisely what just happened following the Squid's reco to buy Nikkei September futures (NKU3) ahead of the BOJ meeting. What is Goldman's thesis in a nutshell: hope may be fading in Abenomics, but the "incentives for Governor Kuroda to use the [upcoming BOJ] meeting to signal a firmer and clearer commitment to the easing course, and to highlight the potential to do more, are high and rising." In other words, please bet the farm on more of the same jawboning that lead to a 20% loss for anyone who bought as recently as 2 weeks ago. Oh, and by the way, complete the sentence, whenever a client is buying from a Goldman flow trader, the Goldman flow trader is [____].

"I think we are going to go through the ringer... It is bad enough already, but there is no way that we can step back."

 

"I think monetizing debt and spending and deficit is going to get much, much worse until the world rejects the dollar."

 

"when people become frightened, they look for things of real value, and I don't think they can repeal the laws of economics that says that for 6,000 years metals have been beneficial. They will go to monetary metals, gold and silver"

 

"...if we have an authoritarian government, that is our greatest threat. So, I would like to think that there is no perfect protection, other than shrinking the size and scope and power of government, so that we can be left alone and take care of ourselves."

Goldbugs the world over may not know it, but the one catalyst they are all waiting for, is for the PBOC to throw in the towel to Bernanke's and Kuroda's liquidity tsunami and join in the global reflation effort. Alas, those hoping the Chinese central bank would do just this on Friday were disappointed. Moments ago the 21st Century Business Herald, via MNI, reported that the People's Bank of China "decided to shelve plans to inject short-term liquidity into the market late Friday because of concerns it would be sending the wrong signal in light of the government's ongoing commitment to its "prudent" monetary policy stance. Rumors hit the market mid-afternoon about an injection in the region of CNY150 bln via the PBOC's rarely-used short-term liquidity operation (SLO) tool. But how much longer can it avoid the inevitable: what happens when overnight loan yields soar to 20% or 30% or more, and when the repo and SHIBOR markets lock up and no overnight unsecured wholesale funding is available? Because when China finally does join what is already an historic liquidity tsunami then deflation will be the last thing the world will have to worry about. In the meantime, we welcome every chance to dollar cost average lower on physical hard assets, the same hard assets that none other than 1 billion concerned Chinese will direct their attention to when inflation makes it long overdue comeback to the world's most populous country.

Just six short months ago (before GGBs rallied 119% and the Athens Stock Index 53%), the EU and IMF agreed on Greek Debt/GDP targets, pronounced the nation "fixed", and went on winter vacation. Well, surprise, the hockey-stick of expected GDP has not come to pass and now, as Der Spiegel reports, the IMF is refusing to participate in further rescue programs for Greece unless financing for the nation is secured for the next 12 months - in other words - a new haircut for Greece will be required to cover the EUR4.6 billion funding shortfall.

Following widespread discussion of the impact that Wall Street investors (gorging on the Fed's free-money extravaganza) have had on home prices, today's final straw for Blackstone appears to be the New York Times' editorial suggesting/blaming them (and others) for driving up the prices of single family homes and reducing the supply of affordable housing for first-time home owners. Blackstone decided to hit back with some of its own version of real estate truthiness via its' blog and why it is "proud of what it is doing in the housing market." So here are the six reasons that Blackstone believes laying the blame for housing bubble 2.0 at their (them being Wall Street) feet is wrong (and a few short responses to their perspective).

Well that didn't take long. It took precisely two hours for damage control #1 to hit following the PRISM-blower's self-revelation. Edward Snowden's current employer - Booz Allen - has very rapidly issued a statement distancing itself from this lone rogue data assassin.

Presented with little comment aside to ask - just what are the Japanese so confident about, now that two of three pillars of Abe(g)nomics appear to be cracking?

Hidden in the Edward Snowden story is this gem exposing just how it was that the story of Swiss bank secrecy was broken. Guess who was at the bottom? None other than the US Central Intelligence Agency. We are confident any US citizens who recently have had to shut down their Zurich, Geneva, Bern, Zug or Lugano bank accounts at a sizable loss of course, not to mention countless Swiss bankers currently facing prosecution, as well as various Swiss citizens will find it all quite fascinating.

"I realised that I was part of something that was doing far more harm than good... The NSA routinely lies in response to Congressional inquiries about scope of surveillance in America. The NSA is intent on making every conversation and every form of behaviour in the world known to them.... What they're doing" poses "an existential threat to democracy."

- Edward Snowden, 29, PRISM Whistleblower

On this day in 1943 the “Current Tax Payment Act”, was passed by Congress. It provides for income taxes on wages and salaries to be withheld by employers from paychecks. The purpose stated was that is was an emergency provision for the War. Sure — but it is still with us today. Milton Friedman, who was a key player in implementing the “tax withholding” system realized what he had done and sought redemption: "... It never occurred to me at the time that I was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom. Yet, that is precisely what I was doing."

Chevron, we have a problem.

Moar may not be better after all...

Gross: Surveillance policy of Bush 42 “puts forward a false choice btw the liberties we cherish & the security we provide.” B. Obama 2007

— PIMCO (@PIMCO) June 9, 2013

As we got closer to June 11/12, the date when the German Constitutional Court will conduct a public hearing on the various challenges to the ESM and OMT, the ECB would have no choice but to disclose more details about the real terms of the OMT to assure smooth passage of the OMT, and not to jeopardize the tenuous balance in Europe where things are once again going bump in the night with bond yields suddenly blowing wider on fears the Japanese bond carry trade is set to unwind... The first such notable detail comes courtesy of the FAZ this morning, which "in fear of the judgment of the Federal Constitutional Court, the European Central Bank (ECB) has revealed for the first time the boundaries of their controversial bond buying program... ECB President Mario Draghi announced last year, if necessary, that unlimited government bonds of distressed euro countries would be monetized to save the euro. Meanwhile, however, the central bank has limited this program to a maximum volume of €524 billion and also communicated this to the court." This is the maximum allowable purchases of Spanish, Italian, Irish and Portuguese bonds.